Islamic Law, Institutions and Economic Development in the Islamic Middle East

Timur Kuran has spent much of the last decade investigating the economic and institutional development of the Middle East. The Long Divergence: How Islamic Law Held Back the Middle East brings the results of this research together to provide an explanation for the decline in the region’s economic fortunes. Although generations of scholars have sought to understand the Middle East’s economic decline, Kuran’s book is especially timely given recent political developments in the region. Observers across the world are looking to the region’s history to better understand the political and economic ramifications of the Arab Spring. While Kuran seems sceptical that the region can currently sustain democratic rule (p. 301) his analysis provides hope that institutional reforms can lead to positive political and economic outcomes in the long run. Kuran links the long-term decline of Middle Eastern economies to a delay in adopting the institutions of the modern (Western) economy (p. 5). The critical institutions in Kuran’s view boil down to those that affected the ability of merchants to accumulate capital (both statically and dynamically) and to engage in impersonal exchange. Islamic law discouraged capital accumulation through its egalitarian inheritance system. This legal system also discouraged the emergence of impersonal exchange. Islamic institutions — arguably the most conducive to economic development in the world throughout the early Middle Ages — stagnated starting somewhere in the later Middle Ages and were eventually surpassed by those in Western Europe. Western Europe’s institutional changes facilitated both impersonal exchange and capital accumulation. These and subsequent institutional advances allowed Europe to increasingly dominate economic interactions with the Middle East. Economists increasingly view institutional differences as key to understanding divergent economic outcomes. Kuran is a pioneer in applying this